there is another possibility I've should have mentioned. just don't know enough about what happened.
losses from Ponzi type Investment Schemes
The IRS has issued the following guidance to
assist taxpayers who are victims of losses from
Ponzi-type investment schemes.
• Revenue Ruling 2009-9, 2009-14 I.R.B. 735
https://www.irs.gov/irb/2009-14_IRB#RR-2009-9
• Revenue Procedure 2009-20, 2009-14 I.R.B.
749
https://www.irs.gov/irb/2009-14_IRB#RP-2009-20
• Revenue Procedure 2011-58, 2011-50 I.R.B.
849
https://www.irs.gov/irb/2011-50_IRB#RP-2011-58
If you qualify to use Revenue Procedure
2009-20, as modified by Revenue Procedure
2011-58, and choose to follow the procedures
in the guidance, first fill out Section C to
determine the amount to enter on Section B,
line 28. Skip lines 19 through 27. Section C of
Form 4684 replaces Appendix A in Revenue
Procedure 2009-20. You don't need to
complete Appendix A.
For more information, see the instructions
for Section C, later, and the above revenue
ruling and revenue procedures.
If you choose not to use the procedures in
Revenue Procedure 2009-20, you may claim
your theft loss by filling out Section B, lines 19
to 39, as appropriate.
Section C—Theft Loss
Deduction for Ponzi-Type
Investment Scheme Using the
Procedures in Revenue
Procedure 2009-20
Fill out Section C if you claim a theft loss
deduction for a Ponzi-type investment scheme
and you meet both of the following conditions.
• You qualify to use Revenue Procedure
2009-20, as modified by Revenue Procedure
2011-58.
• You choose to follow the procedures in the
guidance.
If you meet both conditions, fill out Section C
in lieu of Appendix A in Revenue Procedure
2009-20.
For more information about claiming a theft
loss deduction from a Ponzi-type investment
scheme, see the following guidance.
Line 40
Enter the initial amount of cash or basis of
property that you invested in the investment
arrangement. Don't include any of the following
on this line, line 41, or line 42.
• Amounts borrowed from the responsible
group and invested in the specified fraudulent
arrangement, to the extent the borrowed
amounts weren't repaid at the time the theft was
discovered.
• Amounts such as fees that were paid to the
responsible group and deducted for federal
income tax purposes.
• Amounts reported to you (the qualified
investor) as taxable income that weren't
included in gross income on the investor's
federal income tax returns.
• Cash or property that you (the qualified
investor) invested in a fund or other entity
(separate from you (the qualified investor) for
federal income tax purposes) that invested in a
specified fraudulent arrangement.
For definitions of responsible group,
specified fraudulent arrangement, and qualified
investor, see Section 4 of Revenue Procedure
2009-20.
Line 41
Enter the amounts of cash or the basis of
property that you invested after you made the
initial investment (including amounts
reinvested).
Line 42
Enter the total amounts of net income (for
example, interest and dividends minus
expenses) from the specified fraudulent
arrangement that, consistent with information
received from that arrangement, you included in
income for federal tax purposes for all tax years
before the discovery year, including tax years
for which a refund is barred by the statute of
limitations.
Discovery year. The discovery year is the tax
year when one of the following occurs.
• The indictment, information, or complaint
described in section 4.02(1) or (2) of Revenue
Procedure 2009-20 (as modified by Revenue
Procedure 2011-58) is filed.
• The complaint or similar document
described in section 4.02(3) of Revenue
Procedure 2009-20 (as modified by Revenue
Procedure 2011-58) is filed, or the death of the
lead figure occurs, whichever is later.
Line 44
Enter the total amount of cash or property that
you withdrew from the investment arrangement
in all years (whether designated as income or
principal).
Line 45
This is the amount of your investment that is
eligible for a deduction before any actual or
potential recoveries are taken into account.
Line 46
Potential third-party recovery. This is the
amount of all actual or potential claims for
recovery, as of the last day of the discovery
year (defined earlier), that are not from
potential insurance or Securities Investor
Protection Corporation (SIPC) recovery, or a
potential direct recovery.
Potential insurance/SIPC recovery. This is
the total of all actual or potential claims for
reimbursement that, as of the last day of the
discovery year, are attributable to:
• Insurance policies in your name that protect
you from this type of loss;
• Contractual arrangements, other than
insurance, that guaranteed or otherwise
protected against this type of loss; or
• Amounts payable from SIPC, as advances
for customer claims under the Securities
Investor Protection Act of 1970, or by a similar
entity under a similar provision.
Potential direct recovery. This is the amount
of all actual or potential claims for recovery, as
of the last day of the discovery year (defined
earlier), against the responsible individual or
group.
Line 48
Enter the amounts you actually received as a
reimbursement or recovery from any source.
Don't include amounts that are potential direct
recoveries (defined earlier) or potential
third-party recoveries (defined earlier).
Line 49
Enter the amount of potential insurance/SIPC
recovery (defined earlier).
Line 51
Enter the amount from line 51 on line 28 of
Section B. Don't complete lines 19 through 27
for this loss. Then complete Section B, Part II
Part II
Read the statements and declarations in this
part carefully. Enter the required information in
the spaces provided. You are agreeing to these
statements and declarations when you sign
your tax return. The information you enter in this
part will be used to verify the fraudulent
investment arrangement.
